Gino\'s Restaurant is a popular restaurant in Boston, Massachusetts. The owner o

Question

Gino's Restaurant is a popular restaurant in Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intem to conduct an activity-based costing study. The intern, in consultation with the owner, identified the following major activities: Activity Cost Pool Serving a party of dinens Serving a diner Serving drinks Activity Measure Number of parties served Number of diners served Number of drinks ordered Some costs, such as the cost of cleaning the linens that cover the restaurant's tables, vary with the number of parties served Other costs, such as washing plates and glasses, depends on the number of diners served or the number of drinks served Data conceming these activities are shown below Serving a Party Serving a Dinner Serving Drinks Total Total cost Total activity 38,000 69,000 $68,000 $175,000 5,000 parties 10,000 diners 40,000 drinks Prior to the activity based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month was $175,000 and that 10,000 diners had been served Therefore, the average cost per diner was $17.50 (5175,000+ 10,000 diners $1750 per diner) Required 1. Compute the actvity ratos for each of the throo activibes. (Round your answers to 2 decimal places.) Serving a Party Serving a Diner Serving Drinks per party per diner per drink 2. According to the activity based costing system, what is the total cost of serving each of the following parties of diners? (Do not round intermediate calculations. Round your final answers to 2

Explanation / Answer

1) Cost per unit of activity Serving a party 7.6 per party Serving a diner 6.9 per diner serving drinks 1.7 per drink (total cost/total activity) 2) party of four diners who order three drinks in total 40.3 (7.6+4*6.9+3*1.7) a party two diner who do not order any drink 21.4 (7.6+2*6.9+0) party of one diner who order two drinks 17.9 (7.6+6.9+1.7*2) 3) party of four diners who order three drinks in total 10.08 (40.3/4) a party two diner who do not order any drink 10.7 (21.4/2) party of one diner who order two drinks 17.9 (17.9/1)

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